pj, morning. Was just thinking about how many shares are available to trade, anyone know a number. I don't think WMB has done anything that would cause the penalty to be paid. Left said on the ETE board that Williams will go through the motions of the vote and trying to close to avoid the penalty and probably set to sue. Not sure that is a material result. So I don't see ETE paying anything to WMB but others may have a better opinion. As for Tall Grass it is controlled by private equity and they can drop down the rest of REX pipeline, Looks like good growth over next three years. Don't know if they would merge, probably just continue to drop down. It is worth a look, imo, 60%, 40%, 40% growth. And more drop downs. Doesn't look like much downside if the NE gas keeps growing.
left, I don't think ETE holders are thinking about the prospect of Warren cutting ETE's dist, the ETP yield is double digits and they can't grow with that kink of cost of equity and the balance sheet maxed out. Would bet that ETE probably ends up maybe down by the end of the day. No skin off KWs nose for cutting the dist, his cash flow is preserved and actually enhanced with the conv pref plan, too easy a decision to make, cut it for his LP holders and he makes more money over the next two years, on their backs. What a guy. Am glad the merger is dead. Seems WMB may want to continue to have position to sue for damages, not sure that will be fruitful, but could get something. Again, don't think ETE holders are focusing on their dist being cut to fund ETP's growth.
From the Bloomberg article. Also, some analyst mentioned 60% in div and roll up of WPZ. A dollar div feels about right. Definitely the board that voted for the deal should go. WMB div cut, the cash goes to growth which will improve cash flow over time. WMB will not stay down for long or someone else will be ready to buy Transco, Northwest and NE gathering and processing franchise.... Williams assets touch 30% of the gas produced in the US and are the best positioned for the expected nat gas growth. Two thirds of the growth in gas demand will be along the Transco and NW corridors. And higher gas prices are good for WMB, it's a volume game and the NE needs higher gas prices to spur more drilling and vol growth to meet demand. Throw in LNG exports. This deal noise will pass. I would guess that ETE probably has to reduce its dist, ETP with a yield of 11%, the cost of capital is prohibitive. ETE is challenged too, the reason Warren didn't want the deal with $6 b in debt. But you have to remember that he wanted Williams assets.
“You need the board and the management team to be on the same page and moving in the same direction,” he said. Those who supported the deal, he said, should conclude: “I was in favor of the deal. It’s clear it didn’t work. The right thing for me to do is leave.”
The market imo is short term focused, think CNBC. The journalists love a crisis and Brexit. Think about how long we dealt with Grexit and you never hear anything about Greece now. You have to tune it out and be right on the fundamentals, neither of which is easy, but easier than trying to guess daily gyrations. Have a great summer.
pj and achilles, the fundamentals of gas is the key, more power generation, not only here but around the world. And NGLs for chemicals. I still believe it is a long term trend but I thought oil would bottom at $60. ETE will need to eliminate their IDRs to continue to grow. in hindsight the roll up of WPZ would have been a good move, lower the cost of capital. I don't think separate GPs work when you get to a certain size, KMI rolled up the LPs, PAGP will merge this year. EPD did it a few years ago, MMP doesn't have it. Have heard it said that the EPD CEO said they would love to own Transco.
I was hoping that TEGP would fall further than it did Fri. Bought around $21.70ish. It really showed their were buyers. Looked at Williams pres from last year, nat gas demand will grow by 36bcf/d by 2025, Williams will have 26 bcf/d of growth on their pipeline corridors, most by Transco. But they showed 6bcf/d for growth on the Rex corridor. I think Rex could be a gold mine if the NE gas expansion continues, it should imo. Thanks for mentioning TEGP. Time will tell. Say that gas rigs were up.
Go back and look at their assets and the fundamentals for nat gas, power gen and exports, the NE will provide essentially all of the new add'l supply. You can't replicate Transco or Northwest, they gather 40% of NE gas. They have billions of growth opps. I could be wrong but still think great assets will prevail in long term. Management, including board is a q mark. The release said they expect to reduce div, could be material.
Best investments are mad with lots of uncertainty, think 09. There has been lots of uncertainty with the comm price retreat but gas is already showing $3 plus next year, gas rigs were up last week. To make it a great investment, you have to have the uncertainty and guess right that the fundamentals will be there. They got caught in a growth cycle with debt to pay for the billions of new projects, look at the Transco projects this year.
I believe they will get through this, but I could be wrong. And me saying it daily won't make it so. You could be right. Biggest negative now is the Board imo and management. They should have tempered their growth and managed their balance sheet better. I do think merging WPZ will be back on table, elim the IDRs which will be a problem for ETE. Infrastructure spending was something like $50 billion a year for year and now it might be $40 billion or whatever. All the market can focus on now is the ETE deal and the div cut. A great opp imho.
I own ETE also and plan to keep it. ETE will at some point run into the same problem all separate GPs with the IDRs, they won't be able to grow. WMB was rolling up WPZ. And I wouldn't be surprised if ETE cut their dist also but who knows. Warren has his dist guaranteed so no skin off his nose. The problem with all of the MLPs is you can't pay a hefty div/dist and still grow. Still think WMB should be a good bet for the next three years, they have the best assets in the sector, Transco, Northwest, NE G and P. Looking at nat gas demand the other pipe that has 6 bcf of new demand is REX, owned by TEGP, 60%, 40%, 40% growth next three years 4% yield now. Would bet that three years out from today WMB will have a better return than ETE, time will tell.
From the 15 analyst mtg, they were talking about $30 billion of growth projects to '20. I'm sure the number is smaller but the infrastructure spending will still be substantial with most of it in the Atlantic Gulf segment. You can't have a high yield MLP and a high growth MLP at the same time. EPD has grown but they have restricted the dist to fund the growth, cov is 140%, I don't think I would mind a material cut in the div to fund growth, a la KMI, I think WMB has maybe better opps along the Transco corridor. I'm guessing maybe $1 div.
Not sure they would lose much mkt cap if they can show the growth path. Problem is we really haven't seen much guidance with the merger pending.
Pj and left, I went back and looked at their analyst mtg in May of last year. They showed a div of $2.68 and $3.01 in 17 and this was before the WPZ roll up. Comm prices for 16 were forecast at $3.50 and $65, that's not too far off imo from where we'll be next year. And the Atlantic Gulf segment, they showed that through 2025 there would be 36bcf/d of new demand and their Transco and NW pipes would capture 25 bcf/d of that demand, 22 from Transco. There seems to be a disconnect between those projections and what could be expected now except their cost of capital is much higher. Bottom line is this company has good prospects as comm prices come back. Still think a EPD hook up would with EPD's NGL franchise and WMB's pipe franchise, as well as the Petchem/NGL and NE G and P assets. And you would get great management and a GP that currently owns 30% of the LP and there are no IDRs to dilute the growth and keep cost of capital lower. I can't believe things are as bad as the market is imagining. Going to try to reconcile some of the past projection to what the future may look like. And still wonder is the div statement was more of a neg ploy, just don't know.
Trying to think of who should run this company, the management at EPD is the best, they don't get ahead of themselves, have a great balance sheet and want to keep it that way, the GP owners, the Duncan family have done nothing but what's in the best interest of all owners long term. A combination would work I think. They could offer one for one, EPD's around $30, dist is $1.60. To make it tax free would need the c corp ETC type security, but could merge WPZ easily. That would be a great combination with competent mgt with integrity. They are not gunslingers.
Agree, seems the board with the two activists should go, not sure they were a good addition. Wonder if they will stick around. I'd like to see a big time CEO, Chairman with a lot of skin in the game. One thing that gives you hope is they have a great set of assets, starting with Transco. Better than ETE's and that's why KW wanted them so badly.
Monday should be interesting, wonder how many shares didn't make the election, those are the only shares to trade. Throw in the Brexit mess and poss of appeal and it's just uncertainty piled on uncertainty. Some are speculating that WMB could prevail in an appeal. Just read a NYT article on people are shunning elect cars for gas guzzlers again, no surprise. Oil rig count down some. Lots of talk about NGLs demand over next few years, nat gas rig count up. I believe if I remember correctly, KW bought 2 mm units at $18 or something like that. Not sure ETE investors realize that he could cut the dist for ETE to fund the LPs, he still has his conv pref plan in place. I didn't see any mention of the conv pref plan in the court ruling. Wonder why not?
Pj, this has been a mess, was just looking at the COB's background, I think we have a light weight board. If ETE had not come along, they would have merged WPZ, wasn't real wild about that with the tax hit, but WMB would probably be $40 today. Warren definitely out maneuvered them and got lucky but I didn't really want to be partnered with him. Would like to get the last move over and look at what their guidance is for the next couple of years, they do have things they can sell that are valuable. I do think they need a new board after this mess. I read a report that thinks the NGL demand will be so strong that the NE won't be able to keep up. The fundamentals look good.
Another prospect for buying WMB if this merger dies is D Dominion Resources. Good NE assets, big enough to do it. That would be a good combination.
The 10 yr T note at 1.5+% rate. Dollar strength doesn't help comm price. I guess the brexit will be like waiting for the Fed to raise rates, the impact won't be felt for a long time. And the Fed is probably on hold. Have been buying TEGP today.